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Domino’s Pizza® Announces Third

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Domino’s Pizza® Announces Third Quarter 2017 Financial Results

Domestic same store sales growth of 8.4%; International same store sales growth of 5.1%

Global net store growth of 217

Global retail sales growth of 14.5%

Diluted EPS up 22.9% to $1.18

Completed $1.9 billion recapitalization transaction

PR Newswire

ANN ARBOR, Mich., Oct. 12, 2017

ANN ARBOR, Mich., Oct. 12, 2017 - Domino’s Pizza, Inc. (NYSE: DPZ), the recognized world leader in pizza delivery, today announced results for the third quarter of 2017, comprised of strong growth in same store sales, global store counts and earnings per share. Domestic same store sales grew 8.4% during the quarter versus the year-ago period, which represents the 26th consecutive quarter of positive sales momentum in the Company’s domestic business. International same store sales grew 5.1% during the quarter, marking the 95th consecutive quarter of positive international same store sales growth. The Company had global net store growth of 217 stores in the quarter, comprised of 53 net new domestic stores and 164 net new stores internationally, and has added 1,182 net new stores over the trailing four quarters.

Diluted EPS was $1.18 for the third quarter, which was up 22.9% over the Company’s diluted EPS in the prior year quarter. Management noted that the as-reported diluted EPS for the third quarter was negatively impacted by expenses related to the Company’s recapitalization. Diluted EPS, as adjusted, was $1.27 for the third quarter, which was up 32.3% over the Company’s diluted EPS in the prior year quarter.

In connection with the Company’s recapitalization, as further discussed below, the Company borrowed $1.9 billion, and used a portion of the proceeds to repay its remaining debt under its 2012 fixed rate notes. The Company also entered into a $1.0 billion accelerated share repurchase (ASR) agreement with a counterparty, which was completed subsequent to the quarter. In connection with the ASR agreement, the Company will receive and retire a total of 5,218,670 shares of its common stock at an average price of $191.62, including 4,558,863 shares of its common stock received and retired during the third quarter.

The Company’s Board of Directors declared a 46-cent per share quarterly dividend for shareholders of record as of September 15, 2017 that was paid on September 29, 2017. The Company’s Board of Directors also declared a 46-cent per share quarterly dividend for shareholders of record as of December 15, 2017, to be paid on December 29, 2017.

“The third quarter was an excellent example of us simply continuing to do what we do best: executing on our long-term strategy, relying upon our strong fundamentals and aligning with our outstanding U.S. and international operators to turn in another quarter of phenomenal results,” said J. Patrick Doyle, Domino’s President and Chief Executive Officer. “The momentum behind this business continues to amaze me, proving once again that our domestic and international franchisees are second to .”

Third Quarter Highlights:

(dollars in millions, except per share data)

Third

Quarter of

2017

Third

Quarter of

2016

Three FiscalQuarters of

2017

Three FiscalQuarters of

2016

Net income

$

56.4

$

47.2

$

184.6

$

141.9

Weighted average diluted shares

47,715,788

49,242,182

49,066,610

50,309,217

Diluted earnings per share, as reported (1)

$

1.18

$

0.96

$

3.76

$

2.82

Items affecting comparability (2)

0.08

-

0.08

-

Diluted earnings per share, as adjusted (1) (2)

$

1.27

$

0.96

$

3.84

$

2.82

(1)

In the first quarter of 2017, the Company adopted Accounting Standards Update No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, (ASU 2016-09), which requires the Company to record excess tax benefits from equity-based compensation as a reduction of the provision for income taxes in the income statement, whereas they were previously recognized in equity. See the “Adoption of New Accounting Guidance” section below for additional information.

(2)

Refer to the Items Affecting Comparability section on page three for additional details. Diluted earnings per share, as adjusted figures may not sum to the total due to the rounding of each individual calculation. See also the Comments on Regulation G section on page four.

Revenues were up 13.6% for the third quarter versus the prior year period, due primarily to higher supply chain revenues from increased volumes.. Higher same store sales and store count growth in both our domestic and international markets also contributed to the increase in revenues.

Net Income increased 19.3% for the third quarter versus the prior year period, primarily driven by an increase in same store sales growth and store count as well as higher supply chain volumes. The adoption of the new equity-based compensation accounting standard also positively impacted net income. These increases were partially offset by higher general and administrative expenses, primarily from investments in technological initiatives. Net income was also negatively impacted by expenses related to the Company’s recapitalization.

Diluted EPS was $1.18 for the third quarter versus $0.96 in the prior year quarter, which represents a 22-cent or 22.9% increase over the prior year quarter. Diluted EPS, as adjusted, was $1.27 for the third quarter versus $0.96 in the prior year quarter, which represents a 31-cent or 32.3% increase over the prior year quarter. These increases were driven by higher net income, as well as lower diluted share count, primarily as a result of the share repurchases made during the trailing four quarters. (See the Items Affecting Comparability section on page three and the Comments on Regulation G section on page four.)

The table below outlines certain statistical measures utilized by the Company to analyze its performance. Refer to the Comments on Regulation G section on page four for additional details.

Third Quarter of 2017

Third Quarter of 2016

Same store sales growth: (versus prior year period)

Domestic Company-owned stores

+ 8.4

%

+ 13.8

%

Domestic franchise stores

+ 8.4

%

+ 12.9

%

Domestic stores

+ 8.4

%

+ 13.0

%

International stores (excluding foreign currency impact)

+ 5.1

%

+ 6.6

%

Global retail sales growth: (versus prior year period)

Domestic stores

+ 12.0

%

+ 16.2

%

International stores

+ 16.8

%

+ 13.6

%

Total

+ 14.5

%

+ 14.9

%

Global retail sales growth: (versus prior year period,

excluding foreign currency impact)

Domestic stores

+ 12.0

%

+ 16.2

%

International stores

+ 16.3

%

+ 18.1

%

Total

+ 14.2

%

+ 17.2

%

Domestic

Company-

owned Stores

Domestic

Franchise

Stores

Total

Domestic

Stores

International

Stores

Total

Store counts:

Store count at June 18, 2017

396

5,042

5,438

8,779

14,217

Openings

3

52

55

176

231

Closings

—

(2)

(2)

(12)

(14)

Store count at September 10, 2017

399

5,092

5,491

8,943

14,434

Third quarter 2017 net change

3

50

53

164

217

Trailing four quarters net change

12

206

218

964

1,182

2017 Recapitalization

On July 24, 2017, the Company completed its recapitalization with the receipt of $1.9 billion of gross proceeds. The Company borrowed $1.6 billion of fixed rate senior secured notes and $300.0 million of floating rate senior secured notes and entered into a new $175.0 million variable funding note facility, which replaced its previous $125.0 million variable funding note facility. The Company used a portion of the proceeds from the recapitalization to repay the remaining $910.5 million in outstanding principal and interest under its 2012 fixed rate notes on July 27, 2017.

Additionally, the Board of Directors authorized a new share repurchase program that allows the Company to repurchase up to $1.25 billion of its common stock. This repurchase program replaced the remaining availability of approximately $136.4 million under the Company’s previously approved $250.0 million share repurchase program. As part of this $1.25 billion share repurchase program, the Company entered into a $1.0 billion ASR agreement with a counterparty, which was completed subsequent to the quarter. In connection with the ASR agreement, the Company will receive and retire a total of 5,218,670 shares of its common stock at an average price of $191.62, including 4,558,863 shares of its common stock received and retired during the third quarter. As of October 12, 2017, the Company had authorization for repurchases of $250.0 million remaining under its open market share repurchase program.

The Company incurred certain expenses in connection with the recapitalization that are outlined in the items affecting comparability table below. Separately, the Company also recorded $16.8 million of debt issuance costs, which are included as a reduction of long-term debt on the consolidated balance sheet at September 10, 2017 and are expected be amortized into interest expense over the terms of its fixed and floating rate notes.

Adoption of New Accounting Guidance

The Company adopted ASU 2016-09 in the first quarter of 2017. This standard addresses the accounting for income taxes and forfeitures and the cash flow presentation of share-based compensation. The adoption resulted in a $3.5 million decrease in our third quarter 2017 provision for income taxes, or a 4.2 percentage point decrease in our third quarter 2017 effective tax rate, due to the recognition of excess tax benefits for options exercised and the vesting of equity awards. This item positively impacted our diluted EPS by approximately seven cents in the third quarter of 2017. Refer to the Company’s Form 10-Q for the quarter ended September 10, 2017 for additional detailed information regarding the impact of the adoption of ASU 2016-09.

Conference Call Information

The Company will file its quarterly report on Form 10-Q this morning. As previously announced, Domino’s Pizza, Inc. will hold a conference call today at 10 a.m. (Eastern) to review its third quarter 2017 financial results. The call can be accessed by dialing (888) 400-9978 (U.S./Canada) or (706) 634-4947 (International). Ask for the Domino’s Pizza conference call. The call will also be webcast at biz.dominos.com. The webcast will also be archived for one year on biz.dominos.com.

Items Affecting Comparability

The Company’s reported financial results for the third quarter of 2017 and the three fiscal quarters of 2017 are not comparable to the reported financial results for the equivalent periods in 2016. The table below presents certain items that affect comparability between 2017 and 2016 financial results. Management believes that including such information is critical to the understanding of its financial results for the third quarter of 2017 and the three fiscal quarters of 2017 as compared to the same periods in 2016 (See the Comments on Regulation G section on page four for additional details).

In addition to the items noted in the table below, the Company had lower weighted average diluted shares outstanding in 2017 that resulted in an increase in diluted EPS of approximately four cents in the third quarter of 2017 and approximately eight cents in the three fiscal quarters of 2017. The Company also incurred higher net inte